Radian Announces Second Quarter 2022 Financial Results

August 01, 2022 at 17:21 PM EDT

— GAAP net income of $201 million, or $1.15 per diluted share —

— Adjusted diluted net operating income of $1.36 per diluted share —

— Provision for losses of $(114) million in the second quarter of 2022 favorably impacted by positive development on prior period defaults —

— Primary mortgage insurance in force increases 7.1% year-over-year to $254 billion —

— Return on equity of 19.9% and adjusted net operating return on equity of 23.6% —

— Purchased $183.8 million in the second quarter, or 5.2% of total shares outstanding of Radian Group common stock —

— PMIERs excess Available Assets of $1.4 billion (or 38% over the Minimum Required Assets) —

Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended June 30, 2022, of $201.2 million, or $1.15 per diluted share. This compares with net income for the quarter ended June 30, 2021, of $155.2 million, or $0.80 per diluted share.

Key Financial Highlights	Quarter ended
($ in millions, except per-share amounts)	June 30, 2022	March 31, 2022	June 30, 2021
Net income ⁽¹⁾	$201.2	$181.1	$155.2
Diluted net income per share	$1.15	$1.01	$0.80
Consolidated pretax income	$259.9	$234.1	$195.5
Adjusted pretax operating income ⁽²⁾	$302.0	$264.9	$184.7
Adjusted diluted net operating income per share ⁽²⁾⁽³⁾	$1.36	$1.17	$0.75
Return on equity ⁽¹⁾⁽⁴⁾	19.9 %	17.2 %	14.5 %
Adjusted net operating return on equity ⁽²⁾⁽³⁾	23.6 %	19.9 %	13.6 %
New Insurance Written (NIW) - mortgage insurance	$18,935	$18,655	$21,662
Net premiums earned - mortgage insurance	$246.9	$245.2	$247.1
New defaults ⁽⁵⁾	8,009	9,393	8,145
Provision for losses - mortgage insurance	($114.2)	($84.2)	$3.3
homegenius revenues	$32.3	$33.9	$33.5
Book value per share	$23.63	$23.75	$23.02
Accumulated other comprehensive income (loss) value per share ⁽⁶⁾	($1.98)	($0.74)	$0.95
PMIERs Available Assets ⁽⁷⁾	$5,175	$5,102	$5,042
PMIERs excess Available Assets ⁽⁸⁾	$1,424	$1,560	$1,857
Total Holding Company Liquidity ⁽⁹⁾	$1,048	$1,282	$1,191
Total investments	$5,906	$6,335	$6,682
Primary mortgage insurance in force	$254,226	$248,951	$237,302
Percentage of primary loans in default ⁽¹⁰⁾	2.2 %	2.6 %	4.0 %
Mortgage insurance loss reserves	$589	$722	$881

(1)		Net income for the second quarter of 2022 includes a pretax net loss on investments and other financial instruments of $41.9 million, compared with a $29.5 million pretax net loss on investments and other financial instruments in the first quarter of 2022 and a pretax net gain on investments and other financial instruments of $15.7 million for the second quarter of 2021.
(2)		Adjusted results, including adjusted pretax operating income, adjusted diluted net operating income per share and adjusted net operating return on equity, are non-GAAP financial measures. For definitions and reconciliations of these measures to the comparable GAAP measures, see Exhibits F and G.
(3)		Calculated using the company’s statutory tax rate of 21 percent.
(4)		Calculated by dividing annualized net income by average stockholders' equity, based on the average of the beginning and ending balances for each period presented.
(5)		Represents the number of new defaults reported during the period on loans related to primary mortgage insurance policies.
(6)		Included in book value per share for each period presented.
(7)		Represents Radian Guaranty’s Available Assets, calculated in accordance with the Private Mortgage Insurer Eligibility Requirements (PMIERs) financial requirements in effect for each date shown.
(8)		Represents Radian Guaranty’s excess or "cushion" of Available Assets over its Minimum Required Assets, calculated in accordance with the PMIERs financial requirements in effect for each date shown.
(9)		Represents Radian Group's total liquidity, including available capacity under its unsecured revolving credit facility.
(10)		Represents the number of primary loans in default as a percentage of the total number of insured primary loans.

Adjusted pretax operating income for the quarter ended June 30, 2022, was $302.0 million, or $1.36 per diluted share. This compares with adjusted pretax operating income for the quarter ended June 30, 2021, of $184.7 million, or $0.75 per diluted share.

Book value per share at June 30, 2022, was $23.63, compared to $23.75 at March 31, 2022, and $23.02 at June 30, 2021. This represents a 2.6 percent growth in book value per share at June 30, 2022, as compared to June 30, 2021, and includes accumulated other comprehensive income (loss) of $(1.98) per share as of June 30, 2022 and $0.95 per share as of June 30, 2021, which, if excluded as of both dates, would represent 16.0 percent growth for the period. Changes in accumulated other comprehensive income (loss) for the period are primarily from net unrealized losses on investments as a result of an increase in market interest rates during the period. We do not expect to realize these losses given that we have the ability and the expectation to hold these securities until recovery.

“We are pleased with our excellent results in the second quarter with net income of $201 million, return on equity of 19.9 percent and total holding company liquidity of $1 billion. Our primary mortgage insurance in force, which is the main driver of future earnings for our company, grew 7 percent year-over-year, and the number of new defaults in the quarter was the lowest we’ve seen in more than 20 years,” said Radian’s Chief Executive Officer Rick Thornberry. “Moody’s recently upgraded our company, reflecting our improved capital adequacy through risk distribution, our improving profitability metrics, our strong market position and our financial flexibility with strong liquidity. We continue to strategically manage capital, repurchase shares opportunistically and pay regular dividends to stockholders and believe we are well positioned to continue our mission of ensuring affordable, sustainable and equitable homeownership for many years ahead.”

SECOND QUARTER HIGHLIGHTS

NIW was $18.9 billion in the second quarter of 2022, compared to $18.7 billion in the first quarter of 2022, and $21.7 billion in the second quarter of 2021.
- Purchase NIW increased 7.8 percent in the second quarter of 2022 compared to the first quarter of 2022 and increased 10.0 percent compared to the second quarter of 2021.
- Refinances accounted for 2.9 percent of total NIW in the second quarter of 2022, compared to 8.6 percent in the first quarter of 2022, and 22.9 percent in the second quarter of 2021.
- Of the $18.9 billion in NIW in the second quarter of 2022, 95.4 percent was written with monthly and other recurring premiums, compared to 94.5 percent in the first quarter of 2022, and 93.1 percent in the second quarter of 2021.

Total primary mortgage insurance in force as of June 30, 2022, increased to $254.2 billion, an increase of 2.1 percent compared to $249.0 billion as of March 31, 2022, and an increase of 7.1 percent compared to $237.3 billion as of June 30, 2021. The year-over-year change reflects a 12.6 percent increase in monthly premium policy insurance in force and a 15.1 percent decline in single premium policy insurance in force.
- Persistency, which is the percentage of mortgage insurance that remains in force after a twelve-month period, was 71.7 percent for the twelve months ended June 30, 2022, compared to 68.0 percent for the twelve months ended March 31, 2022, and 57.7 percent for the twelve months ended June 30, 2021.
- Annualized persistency for the three months ended June 30, 2022, was 79.8 percent, compared to 76.9 percent for the three months ended March 31, 2022, and 66.3 percent for the three months ended June 30, 2021.

Net mortgage insurance premiums earned were $246.9 million for the quarter ended June 30, 2022, compared to $245.2 million for the quarter ended March 31, 2022, and $247.1 million for the quarter ended June 30, 2021.
- Mortgage insurance in force portfolio premium yield was 40.0 basis points in the second quarter of 2022. This compares to 39.6 basis points in the first quarter of 2022, and 41.1 basis points in the second quarter of 2021.
- The impact of single premium policy cancellations before consideration of reinsurance represented 1.1 basis points of direct premium yield in the second quarter of 2022, 2.4 basis points in the first quarter of 2022, and 5.3 basis points in the second quarter of 2021.
- Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 39.3 basis points in the second quarter of 2022. This compares to 39.6 basis points in the first quarter of 2022, and 41.5 basis points in the second quarter of 2021.
- Additional details regarding premiums earned may be found in Exhibit D.

The mortgage insurance provision for losses was a benefit of $114.2 million in the second quarter of 2022, compared to a benefit of $84.2 million in the first quarter of 2022, and a provision of $3.3 million in the second quarter of 2021.
- The decrease in the second quarter of 2022 compared to both the first quarter of 2022 and the second quarter of 2021 was primarily related to more favorable development on prior period reserves, as compared to the first quarter of 2022 and second quarter of 2021. All periods were impacted by more favorable trends in cures than originally estimated.
- The number of primary delinquent loans was 21,861 as of June 30, 2022, compared to 25,510 as of March 31, 2022, and 40,464 as of June 30, 2021.
- The loss ratio in the second quarter of 2022 was (46.2) percent, compared to (34.3) percent in the first quarter of 2022, and 1.3 percent in the second quarter of 2021.
- Total mortgage insurance claims paid were $3.3 million in the second quarter of 2022, compared to $4.7 million in the first quarter of 2022, and $4.2 million in the second quarter of 2021.

Radian's homegenius segment offers an array of title, real estate and technology products and services to consumers, mortgage lenders, mortgage and real estate investors, GSEs, real estate brokers and agents.
- Total homegenius segment revenues for the second quarter of 2022 were $32.3 million, compared to $33.9 million for the first quarter of 2022, and $33.5 million for the second quarter of 2021.
- Adjusted pretax operating loss, our primary segment measure of profitability for the homegenius segment, for the quarter ended June 30, 2022 was $17.7 million, compared to $13.5 million for the quarter ended March 31, 2022, and $9.2 million for the quarter ended June 30, 2021.
- homegenius non-GAAP performance measures:
  - Adjusted pretax operating loss before allocated corporate operating expenses for the homegenius segment for the quarter ended June 30, 2022 was $12.0 million, compared to $8.2 million for the quarter ended March 31, 2022, and $4.5 million for the quarter ended June 30, 2021.
  - Adjusted gross profit for the homegenius segment for the quarter ended June 30, 2022 was $11.2 million, compared to $12.1 million for the quarter ended March 31, 2022, and $11.7 million for the quarter ended June 30, 2021.
  - Additional details regarding these and other related non-GAAP measures may be found in Exhibits F and G.

Other operating expenses were $90.5 million in the second quarter of 2022, compared to $89.5 million in the first quarter of 2022, and $86.5 million in the second quarter of 2021.
- The increase in the second quarter of 2022 compared to the second quarter of 2021 was driven primarily by a decrease in ceding commissions and an increase in compensation expense. Additional details regarding other operating expenses by segment may be found in Exhibit E.

CAPITAL AND LIQUIDITY UPDATE

Radian Group

As of June 30, 2022, Radian Group maintained $772.5 million of available liquidity. Total Holding Company Liquidity, which includes the company’s $275.0 million unsecured revolving credit facility, was $1.0 billion as of June 30, 2022.
During the second quarter of 2022, the company repurchased 9.1 million shares of Radian Group common stock at a total cost of $183.8 million, including commissions.
In addition, in July 2022 the Company purchased an additional 4.8 million shares of Radian Group common stock at a total cost of approximately $97.5 million, including commissions. After the repurchases in July, purchase authority of up to approximately $97.6 million remained available under the existing program.
The Company purchased $281.3 million of Radian Group common stock, including commissions, during the period April 1, 2022 to July 31, 2022. This represented 7.9 percent in the aggregate of total shares outstanding as of the end of the first quarter.
On May 11, 2022, Radian Group’s board of directors authorized a regular quarterly dividend on its common stock in the amount of $0.20 per share and the dividend was paid on June 3, 2022.

Radian Guaranty

At June 30, 2022, Radian Guaranty’s Available Assets under PMIERs totaled approximately $5.2 billion, resulting in excess available resources or a “cushion” of $1.4 billion, or 38 percent, over its Minimum Required Assets.
As of June 30, 2022, 62 percent of Radian Guaranty's primary mortgage insurance risk in force is subject to some form of risk distribution, providing a $1.1 billion reduction of Minimum Required Assets under PMIERs.

RECENT EVENTS

Consistent with our use of risk distribution strategies to effectively manage capital and proactively mitigate risk, Radian Guaranty agreed to principal terms in July 2022 on a quota share reinsurance arrangement ("2022 QSR Agreement") with a panel of third-party reinsurance providers. Under the 2022 QSR Agreement, which remains subject to final documentation, starting July 1, 2022, we expect to cede 20 percent of policies issued between January 1, 2022, and June 30, 2023, subject to certain conditions. As of June 30, 2022, assuming the 2022 QSR Agreement had been in place:
- Radian Guaranty's Minimum Required Assets would have decreased by approximately $132 million, which would have resulted in an increase in PMIERs excess Available Assets or "cushion" to $1.5 billion, or 43 percent.
- Radian Guaranty's primary mortgage insurance risk in force that is subject to some form of risk distribution would have increased to 76 percent, providing a $1.2 billion reduction of Minimum Required Assets under PMIERs.
On July 21, 2022, Moody's Investors Service ("Moody's") upgraded the insurance financial strength (IFS) rating of Radian Guaranty to A3 from Baa1. In the same rating action, Moody's also upgraded the senior unsecured debt rating of Radian Group Inc. to Baa3 from Ba1. The outlook for the ratings is stable.

CONFERENCE CALL

Radian will discuss second quarter 2022 financial results in a conference call tomorrow, Tuesday, August 2, 2022, at 10:00 a.m. Eastern time. The conference call will be webcast live on the company’s website at https://radian.com/who-we-are/for-investors/webcasts or at www.radian.com. The webcast is listen-only. Those interested in participating in the question-and-answer session should follow the conference call dial-in instructions below.

Please note that there is a new process to access the call via telephone. The call may be accessed via telephone by registering for the call here to receive the dial-in numbers and unique PIN. It is recommended that you join 10 minutes prior to the event start (although you may register and dial in at any time during the call).

A digital replay of the webcast will be available on Radian’s website approximately two hours after the live broadcast ends for a period of one year at https://radian.com/who-we-are/for-investors/webcasts.

In addition to the information provided in the company's earnings news release, other statistical and financial information, which is expected to be referred to during the conference call, will be available on Radian's website at www.radian.com, under Investors.

NON-GAAP FINANCIAL MEASURES

Radian believes that adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity (non-GAAP measures) facilitate evaluation of the company’s fundamental financial performance and provide relevant and meaningful information to investors about the ongoing operating results of the company. On a consolidated basis, these measures are not recognized in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be considered in isolation or viewed as substitutes for GAAP measures of performance. The measures described below have been established in order to increase transparency for the purpose of evaluating the company’s operating trends and enabling more meaningful comparisons with Radian’s competitors.

Adjusted pretax operating income (loss) is defined as GAAP consolidated pretax income (loss) excluding the effects of: (i) net gains (losses) on investments and other financial instruments, except for certain investments attributable to our reportable segments; (ii) gains (losses) on extinguishment of debt; (iii) amortization and impairment of goodwill and other acquired intangible assets; and (iv) impairment of other long-lived assets and other non-operating items, such as impairment of internal-use software, gains (losses) from the sale of lines of business and acquisition-related income and expenses. Adjusted diluted net operating income (loss) per share is calculated by dividing (i) adjusted pretax operating income (loss) attributable to common stockholders, net of taxes computed using the company’s statutory tax rate, by (ii) the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Adjusted net operating return on equity is calculated by dividing annualized adjusted pretax operating income (loss), net of taxes computed using the company’s statutory tax rate, by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.

In addition to the above non-GAAP measures for the consolidated company, we also have presented as supplemental information non-GAAP measures for our homegenius segment of adjusted pretax operating income (loss) before allocated corporate operating expenses and adjusted gross profit. Adjusted pretax operating income (loss) before allocated corporate operating expenses is calculated as adjusted pretax operating income (loss) as described above (which is the segment's ASC 280 GAAP measure of operating performance), adjusted to remove the impact of corporate allocations of other operating expenses for the homegenius segment. Adjusted gross profit is further adjusted to remove other operating expenses. In addition, homegenius adjusted pretax operating margin before allocated corporate operating expenses and adjusted gross profit margin are calculated by dividing homegenius adjusted pretax operating margin before allocated corporate operating expenses and adjusted gross profit, respectively, by GAAP total revenue for the homegenius segment. For the homegenius segment, adjusted pretax operating income (loss) before allocated corporate operating expenses, adjusted gross profit, and the related profit margins are used to facilitate comparisons with other services companies, since they are widely accepted measures of performance in the services industry and are used internally as supplemental measures to evaluate the performance of our homegenius segment.

See Exhibit F or Radian’s website for a description of these items, as well as Exhibit G for reconciliations to the most comparable consolidated GAAP measures.

ABOUT RADIAN

Radian Group Inc. (NYSE: RDN) is ensuring the American dream of homeownership responsibly and sustainably through products and services that include industry-leading mortgage insurance and a comprehensive suite of mortgage, risk, title, real estate and technology products and services. We are powered by technology, informed by data and driven to deliver new and better ways to transact and manage risk. Visit www.radian.com to learn more about how Radian is shaping the future of mortgage and real estate services.

FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS (Unaudited)

Exhibit A:		Condensed Consolidated Statements of Operations Trend Schedule
Exhibit B:		Net Income Per Share Trend Schedule
Exhibit C:		Condensed Consolidated Balance Sheets
Exhibit D:		Net Premiums Earned
Exhibit E:		Segment Information
Exhibit F:		Definition of Consolidated Non-GAAP Financial Measures
Exhibit G:		Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit H:		Mortgage Supplemental Information
		New Insurance Written
Exhibit I:		Mortgage Supplemental Information
		Primary Insurance in Force and Risk in Force
Exhibit J:		Mortgage Supplemental Information
		Claims and Reserves, Default Statistics
Exhibit K:		Mortgage Supplemental Information
		Reinsurance Programs

Radian Group Inc. and Subsidiaries Condensed Consolidated Statements of Operations Trend Schedule Exhibit A

	2022						2021
(In thousands, except per-share amounts)	Qtr 2			Qtr 1			Qtr 4			Qtr 3		Qtr 2
Revenues
Net premiums earned	$	253,892		$	254,190		$	261,437		$	249,118	$	254,756
Services revenue		27,281			29,348			35,693			37,773		29,464
Net investment income		46,957			38,196			37,407			35,960		36,291
Net gains (losses) on investments and other financial instruments		(41,869	)		(29,457	)		3,025			2,098		15,661
Other income		572			703			805			809		822
Total revenues		286,833			292,980			338,367			325,758		336,994
Expenses
Provision for losses		(113,922	)		(83,754	)		(46,219	)		17,305		3,648
Policy acquisition costs		5,940			6,605			7,271			7,924		4,838
Cost of services		22,760			24,753			28,333			30,520		24,615
Other operating expenses		90,495			89,541			80,476			86,479		86,469
Interest expense		20,831			20,846			21,137			21,027		21,065
Amortization of other acquired intangible assets		849			849			863			862		863
Total expenses		26,953			58,840			91,861			164,117		141,498
Pretax income		259,880			234,140			246,506			161,641		195,496
Income tax provision		58,687			53,009			53,061			35,229		40,290
Net income	$	201,193		$	181,131		$	193,445		$	126,412	$	155,206
Diluted net income per share	$	1.15		$	1.01		$	1.07		$	0.67	$	0.80

Selected Mortgage Key Ratios

	2022				2021
	Qtr 2		Qtr 1		Qtr 4		Qtr 3		Qtr 2
Loss ratio ⁽¹⁾	(46.2	)%	(34.3	)%	(18.6	)%	7.1	%	1.3	%
Expense ratio⁽²⁾	26.2	%	27.2	%	25.6	%	28.6	%	25.4	%

(1)		Calculated as provision for losses on a GAAP basis expressed as a percentage of net premiums earned.
(2)		Calculated as operating expenses (which include policy acquisition costs and other operating expenses, as well as allocated corporate operating expenses) on a GAAP basis expressed as a percentage of net premiums earned.

Radian Group Inc. and Subsidiaries Net Income Per Share Trend Schedule Exhibit B

The calculation of basic and diluted net income per share was as follows.

	2022				2021
(In thousands, except per-share amounts)	Qtr 2		Qtr 1		Qtr 4		Qtr 3		Qtr 2
Net income—basic and diluted	$	201,193	$	181,131	$	193,445	$	126,412	$	155,206
Average common shares outstanding—basic		173,705		176,816		179,500		186,741		193,436
Dilutive effect of stock-based compensation arrangements ⁽¹⁾		1,714		2,263		1,628		1,301		1,202
Adjusted average common shares outstanding—diluted		175,419		179,079		181,128		188,042		194,638
Basic net income per share	$	1.16	$	1.02	$	1.08	$	0.68	$	0.80
Diluted net income per share	$	1.15	$	1.01	$	1.07	$	0.67	$	0.80

(1)

The following number of shares of our common stock equivalents issued under our share-based compensation arrangements were not included in the calculation of diluted net income (loss) per share because they would be anti-dilutive.

	2022		2021
(In thousands)	Qtr 2	Qtr 1	Qtr 4	Qtr 3	Qtr 2
Shares of common stock equivalents	189	—	35	—	—

Radian Group Inc. and Subsidiaries Condensed Consolidated Balance Sheets Exhibit C

	June 30			March 31,			December 31,			September 30,			June 30,
(In thousands, except per-share amounts)		2022			2022			2021			2021			2021
Assets
Investments	$	5,906,147		$	6,334,950		$	6,513,542		$	6,658,487		$	6,681,659
Cash		135,262			131,853			151,145			154,709			134,939
Restricted cash		561			1,651			1,475			1,866			2,968
Accrued investment income		35,774			35,531			32,812			33,258			32,223
Accounts and notes receivable		166,380			142,579			124,016			166,730			153,128
Reinsurance recoverables		39,876			55,015			67,896			76,048			75,411
Deferred policy acquisition costs		16,983			16,383			16,317			16,823			17,873
Property and equipment, net		74,874			75,275			75,086			74,170			74,288
Goodwill and other acquired intangible assets, net		17,895			18,744			19,593			20,456			21,318
Prepaid federal income taxes		466,123			354,123			354,123			313,123			275,623
Other assets		414,412			449,642			483,180			525,938			539,638
Total assets	$	7,274,287		$	7,615,746		$	7,839,185		$	8,041,608		$	8,009,068
Liabilities and stockholders’ equity
Unearned premiums	$	298,991		$	312,013		$	329,090		$	348,322		$	373,031
Reserve for losses and loss adjustment expense		594,808			727,247			828,642			893,155			885,498
Senior notes		1,411,458			1,410,458			1,409,473			1,408,502			1,407,545
FHLB advances		184,284			148,983			150,983			172,649			153,983
Reinsurance funds withheld		223,649			225,363			228,078			290,502			285,406
Net deferred tax liability		324,866			324,004			337,509			286,957			266,330
Other liabilities		305,269			320,114			296,614			383,585			303,442
Total liabilities		3,343,325			3,468,182			3,580,389			3,783,672			3,675,235
Common stock		186			193			194			200			207
Treasury stock		(930,284	)		(920,958	)		(920,798	)		(920,355	)		(920,225	)
Additional paid-in capital		1,698,490			1,871,763			1,878,372			2,012,870			2,161,857
Retained earnings		3,491,675			3,326,119			3,180,935			3,012,997			2,913,138
Accumulated other comprehensive income (loss)		(329,105	)		(129,553	)		120,093			152,224			178,856
Total stockholders’ equity		3,930,962			4,147,564			4,258,796			4,257,936			4,333,833
Total liabilities and stockholders’ equity	$	7,274,287		$	7,615,746		$	7,839,185		$	8,041,608		$	8,009,068
Shares outstanding		166,388			174,648			175,421			181,336			188,290
Book value per share	$	23.63		$	23.75		$	24.28		$	23.48		$	23.02

Debt to capital ratio ⁽¹⁾		26.4	%		25.4	%		24.9	%		24.9	%		24.5	%
Risk to capital ratio-Radian Guaranty only		11.9:1			12.1:1			11.1:1			11.4:1			11.4:1

(1)

Calculated as senior notes divided by senior notes and stockholders' equity.

Radian Group Inc. and Subsidiaries Net Premiums Earned Exhibit D

	2022						2021
(In thousands)	Qtr 2			Qtr 1			Qtr 4			Qtr 3			Qtr 2
Premiums earned
Direct - Mortgage
Premiums earned, excluding revenue from cancellations	$	249,937		$	243,599		$	248,704		$	239,786		$	243,077
Single Premium Policy cancellations		6,894			14,696			20,530			25,592			31,592
Total direct - Mortgage		256,831			258,295			269,234			265,378			274,669
Assumed - Mortgage ⁽¹⁾		1,538			1,332			1,470			1,683			1,615
Ceded - Mortgage
Premiums earned, excluding revenue from cancellations		(28,565	)		(27,339	)		(28,333	)		(27,662	)		(27,324	)
Single Premium Policy cancellations ⁽²⁾		(1,965	)		(4,192	)		(5,905	)		(7,338	)		(9,036	)
Profit commission - other ⁽³⁾		19,070			17,078			13,199			4,806			7,162
Total ceded premiums - Mortgage ⁽⁴⁾		(11,460	)		(14,453	)		(21,039	)		(30,194	)		(29,198	)
Net premiums earned - Mortgage		246,909			245,174			249,665			236,867			247,086
Net premiums earned - homegenius		6,983			9,016			11,772			12,251			7,670
Net premiums earned	$	253,892		$	254,190		$	261,437		$	249,118		$	254,756

(1)		Represents premiums from our participation in certain credit risk transfer programs.
(2)		Includes the impact of related profit commissions.
(3)		The amounts represent the profit commission on the Single Premium QSR Program, excluding the impact of Single Premium Policy cancellations.
(4)		See Exhibit K for additional information on ceded premiums for our various reinsurance programs.

Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 1 of 6)

Summarized financial information concerning our operating segments as of and for the periods indicated is as follows. For a definition of adjusted pretax operating income (loss), homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses and homegenius adjusted gross profit, along with reconciliations to consolidated GAAP measures, see Exhibits F and G.

	Three Months Ended June 30, 2022
(In thousands)	Mortgage			homegenius			All Other ⁽¹⁾		Inter- segment ⁽²⁾			Total
Net premiums written ⁽³⁾	$	248,645		$	6,983		$	—	$	—		$	255,628
Increase in unearned premiums		(1,736	)		—			—		—			(1,736	)
Net premiums earned		246,909			6,983			—		—			253,892
Services revenue		2,105			25,261			—		(85	)		27,281
Net investment income		40,197			99			6,661		—			46,957
Other income		572			—			—		—			572
Total		289,783			32,343			6,661		(85	)		328,702
Provision for losses		(114,179	)		309			—		(52	)		(113,922	)
Policy acquisition costs		5,940			—			—		—			5,940
Cost of services		1,960			20,800			—		—			22,760
Other operating expenses before allocated corporate operating expenses ⁽⁴⁾		25,474			23,205			3,077		(33	)		51,723
Interest expense⁽⁵⁾		20,831			—			—		—			20,831
Total		(59,974	)		44,314			3,077		(85	)		(12,668	)
Adjusted pretax operating income (loss) before allocated corporate operating expenses		349,757			(11,971	)		3,584		—			341,370
Allocation of corporate operating expenses		33,237			5,719			381		—			39,337
Adjusted pretax operating income (loss)	$	316,520		$	(17,690	)	$	3,203	$	—		$	302,033

	Three Months Ended June 30, 2021
(In thousands)	Mortgage		homegenius			All Other ⁽¹⁾			Inter- segment ⁽²⁾			Total
Net premiums written ⁽³⁾	$	231,027	$	7,670		$	—		$	—		$	238,697
Decrease in unearned premiums		16,059		—			—			—			16,059
Net premiums earned		247,086		7,670			—			—			254,756
Services revenue		3,732		25,750			44			(62	)		29,464
Net investment income		32,842		31			3,418			—			36,291
Other income		641		—			181			—			822
Total		284,301		33,451			3,643			(62	)		321,333
Provision for losses		3,334		335			—			(21	)		3,648
Policy acquisition costs		4,838		—			—			—			4,838
Cost of services		3,161		21,433			19			2			24,615
Other operating expenses before allocated corporate operating expenses ⁽⁴⁾		25,222		16,160			3,387			(43	)		44,726
Interest expense⁽⁵⁾		21,065		—			—			—			21,065
Total		57,620		37,928			3,406			(62	)		98,892
Adjusted pretax operating income (loss) before allocated corporate operating expenses		226,681		(4,477	)		237			—			222,441
Allocation of corporate operating expenses		32,638		4,721			363			—			37,722
Adjusted pretax operating income (loss)	$	194,043	$	(9,198	)	$	(126	)	$	—		$	184,719

Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 2 of 6)

(1)		All Other activities include: (i) income (losses) from assets held by our holding company; (ii) related general corporate operating expenses not attributable or allocated to our reportable segments; and (iii) certain investments in new business opportunities, including activities and investments associated with Radian Mortgage Capital LLC, and other immaterial activities.
(2)		Includes immaterial inter-segment services revenue for our homegenius segment and immaterial inter-segment provision for losses, cost of services and other operating expenses for our Mortgage segment.
(3)		Net of ceded premiums written under the QSR Programs and the Excess-of-Loss Program. See Exhibit K for additional information.
(4)		Does not include impairment of long-lived assets and other non-operating items, which are not considered components of adjusted pretax operating income (loss).
(5)		Relates to interest on our borrowing and financing activities including our Senior Notes issued by our holding company and FHLB borrowings made by our mortgage insurance subsidiaries.

Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 3 of 6)

	Mortgage
	2022						2021
(In thousands)	Qtr 2			Qtr 1			Qtr 4			Qtr 3		Qtr 2
Net premiums written⁽¹⁾	$	248,645		$	248,360		$	238,529		$	228,116	$	231,027
(Increase) decrease in unearned premiums		(1,736	)		(3,186	)		11,136			8,751		16,059
Net premiums earned		246,909			245,174			249,665			236,867		247,086
Services revenue		2,105			4,552			4,560			5,027		3,732
Net investment income		40,197			34,017			33,916			32,158		32,842
Other income		572			703			661			607		641
Total		289,783			284,446			288,802			274,659		284,301

Provision for losses⁽²⁾		(114,179	)		(84,193	)		(46,560	)		16,794		3,334
Policy acquisition costs		5,940			6,605			7,271			7,924		4,838
Cost of services ⁽²⁾		1,960			3,383			3,710			3,865		3,161
Other operating expenses before allocated corporate operating expenses^{(2) (3)}		25,474			23,755			23,365			25,866		25,222
Interest expense⁽⁴⁾		20,831			20,846			21,137			21,027		21,065
Total ⁽²⁾		(59,974	)		(29,604	)		8,923			75,476		57,620
Adjusted pretax operating income before allocated corporate operating expenses		349,757			314,050			279,879			199,183		226,681
Allocation of corporate operating expenses		33,237			36,209			33,305			33,963		32,638
Adjusted pretax operating income	$	316,520		$	277,841		$	246,574		$	165,220	$	194,043

	homegenius
	2022						2021
(In thousands)	Qtr 2			Qtr 1			Qtr 4			Qtr 3			Qtr 2
Net premiums earned	$	6,983		$	9,016		$	11,772		$	12,251		$	7,670
Services revenue ⁽²⁾		25,261			24,878			31,177			32,805			25,750
Net investment income		99			18			255			35			31
Net gains (losses) on investments		—			—			1,509			—			—
Total ⁽²⁾		32,343			33,912			44,713			45,091			33,451

Provision for losses		309			481			369			540			335
Cost of services		20,800			21,370			24,615			26,646			21,433
Other operating expenses before allocated corporate operating expenses ⁽³⁾		23,205			20,287			16,998			18,544			16,160
Total		44,314			42,138			41,982			45,730			37,928
Adjusted pretax operating income (loss) before allocated corporate operating expenses		(11,971	)		(8,226	)		2,731			(639	)		(4,477	)
Allocation of corporate operating expenses		5,719			5,280			4,847			4,918			4,721
Adjusted pretax operating income (loss)	$	(17,690	)	$	(13,506	)	$	(2,116	)	$	(5,557	)	$	(9,198	)

Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 4 of 6)

	All Other⁽⁵⁾
	2022				2021
(In thousands)	Qtr 2		Qtr 1		Qtr 4		Qtr 3		Qtr 2
Services revenue	$	—	$	—	$	30	$	27	$	44
Net investment income		6,661		4,161		3,236		3,767		3,418
Other income		—		—		144		202		181
Total		6,661		4,161		3,410		3,996		3,643

Cost of services		—		—		8		9		19
Other operating expenses before allocated corporate operating expenses ⁽³⁾		3,077		3,142		2,422		2,623		3,387
Total		3,077		3,142		2,430		2,632		3,406
Adjusted pretax operating income before allocated corporate operating expenses		3,584		1,019		980		1,364		237
Allocation of corporate operating expenses		381		406		373		378		363
Adjusted pretax operating income (loss)	$	3,203	$	613	$	607	$	986	$	(126	)

(1)		Net of ceded premiums written under the QSR Programs and the Excess-of-Loss Program. See Exhibit K for additional information.
(2)		Includes immaterial inter-segment services revenue for our homegenius segment and immaterial inter-segment provision for losses, cost of services and other operating expenses for our Mortgage segment.
(3)		Does not include impairment of long-lived assets and other non-operating items, which are not considered components of adjusted pretax operating income (loss).
(4)		Relates to interest on our borrowing and financing activities including our Senior Notes issued by our holding company and FHLB borrowings made by our mortgage insurance subsidiaries.
(5)		All Other activities include: (i) income (losses) from assets held by our holding company; (ii) related general corporate operating expenses not attributable or allocated to our reportable segments; and (iii) certain investments in new business opportunities, including activities and investments associated with Radian Mortgage Capital LLC, and other immaterial activities.

Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 5 of 6)

Supplemental Other Operating Expense Information by Segment

	Mortgage
	2022						2021
(In thousands)	Qtr 2			Qtr 1			Qtr 4			Qtr 3			Qtr 2
Other operating expenses by type
Salaries and other base employee expenses	$	24,420		$	22,189		$	23,610		$	22,685		$	22,542
Variable and share-based incentive compensation		11,524			16,697			12,649			17,143			15,236
Other general operating expenses		25,611			25,027			25,290			25,639			26,583
Ceding commissions		(2,844	)		(3,949	)		(4,879	)		(5,638	)		(6,501	)
Total	$	58,711		$	59,964		$	56,670		$	59,829		$	57,860

	homegenius
	2022				2021
(In thousands)	Qtr 2		Qtr 1		Qtr 4		Qtr 3		Qtr 2
Other operating expenses by type
Salaries and other base employee expenses	$	12,187	$	10,375	$	7,993	$	6,975	$	6,701
Variable and share-based incentive compensation		4,776		5,522		4,678		6,238		5,896
Other general operating expenses		10,162		8,571		7,851		7,982		6,525
Title agent commissions		1,799		1,099		1,323		2,267		1,759
Total	$	28,924	$	25,567	$	21,845	$	23,462	$	20,881

	All Other
	2022				2021
(In thousands)	Qtr 2		Qtr 1		Qtr 4		Qtr 3		Qtr 2
Other operating expenses by type
Salaries and other base employee expenses	$	1,726	$	1,613	$	1,001	$	1,158	$	1,187
Variable and share-based incentive compensation		709		953		874		1,144		958
Other general operating expenses		1,023		982		920		699		1,605
Total	$	3,458	$	3,548	$	2,795	$	3,001	$	3,750

Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 6 of 6)

	Inter-segment
	2022						2021
(In thousands)	Qtr 2			Qtr 1			Qtr 4			Qtr 3			Qtr 2
Other operating expenses by type
Other general operating expenses	$	(33	)	$	(40	)	$	(46	)	$	(57	)	$	(43	)
Total	$	(33	)	$	(40	)	$	(46	)	$	(57	)	$	(43	)

	Total
	2022						2021
(In thousands)	Qtr 2			Qtr 1			Qtr 4			Qtr 3			Qtr 2
Other operating expenses by type
Salaries and other base employee expenses	$	38,333		$	34,177		$	32,604		$	30,818		$	30,430
Variable and share-based incentive compensation		17,009			23,172			18,201			24,525			22,090
Other general operating expenses		36,763			34,540			34,015			34,263			34,670
Ceding commissions		(2,844	)		(3,949	)		(4,879	)		(5,638	)		(6,501	)
Title agent commissions		1,799			1,099			1,323			2,267			1,759
Total	$	91,060		$	89,039		$	81,264		$	86,235		$	82,448

Radian Group Inc. and Subsidiaries Definition of Consolidated Non-GAAP Financial Measures Exhibit F (page 1 of 2)

*Use of Non-GAAP Financial Measures*

In addition to the traditional GAAP financial measures, we have presented “adjusted pretax operating income (loss),” “adjusted diluted net operating income (loss) per share” and “adjusted net operating return on equity,” which are non-GAAP financial measures for the consolidated company, among our key performance indicators to evaluate our fundamental financial performance. These non-GAAP financial measures align with the way the Company’s business performance is evaluated by both management and the board of directors. These measures have been established in order to increase transparency for the purposes of evaluating our operating trends and enabling more meaningful comparisons with our peers. Although on a consolidated basis “adjusted pretax operating income (loss),” “adjusted diluted net operating income (loss) per share” and “adjusted net operating return on equity” are non-GAAP financial measures, we believe these measures aid in understanding the underlying performance of our operations. Our senior management, including our Chief Executive Officer (Radian’s chief operating decision maker), uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of the Company’s business segments and to allocate resources to the segments.

Adjusted pretax operating income (loss) is defined as GAAP consolidated pretax income (loss) excluding the effects of: (i) net gains (losses) on investments and other financial instruments, except for certain investments attributable to our reportable segments; (ii) gains (losses) on extinguishment of debt; (iii) amortization and impairment of goodwill and other acquired intangible assets; and (iv) impairment of other long-lived assets and other non-operating items, such as impairment of internal-use software, gains (losses) from the sale of lines of business and acquisition-related income and expenses. Adjusted diluted net operating income (loss) per share is calculated by dividing (i) adjusted pretax operating income (loss) attributable to common stockholders, net of taxes computed using the company’s statutory tax rate, by (ii) the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Adjusted net operating return on equity is calculated by dividing annualized adjusted pretax operating income (loss), net of taxes computed using the company’s statutory tax rate, by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.

Although adjusted pretax operating income (loss) excludes certain items that have occurred in the past and are expected to occur in the future, the excluded items represent those that are: (i) not viewed as part of the operating performance of our primary activities or (ii) not expected to result in an economic impact equal to the amount reflected in pretax income (loss). These adjustments, along with the reasons for their treatment, are described below.

	(1)		*Net gains (losses) on investments and other financial instruments.* The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities, our tax and capital profile and overall market cycles. Unrealized gains and losses arise primarily from changes in the market value of our investments that are classified as trading or equity securities. These valuation adjustments may not necessarily result in realized economic gains or losses.

			Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these realized and unrealized gains or losses and changes in fair value of other financial instruments. Except for certain investments attributable to our reportable segments, we do not view them to be indicative of our fundamental operating activities.

	(2)		*Loss on extinguishment of debt.* Gains or losses on early extinguishment of debt and losses incurred to purchase our debt prior to maturity are discretionary activities that are undertaken in order to take advantage of market opportunities to strengthen our financial and capital positions; therefore, we do not view these activities as part of our operating performance. Such transactions do not reflect expected future operations and do not provide meaningful insight regarding our current or past operating trends.

	(3)		*Amortization and impairment of goodwill and other acquired intangible assets.* Amortization of acquired intangible assets represents the periodic expense required to amortize the cost of acquired intangible assets over their estimated useful lives. Acquired intangible assets are also periodically reviewed for potential impairment, and impairment adjustments are made whenever appropriate. We do not view these charges as part of the operating performance of our primary activities.

	(4)		*Impairment of other long-lived assets and other non-operating items.* Includes activities that we do not view to be indicative of our fundamental operating activities, such as: (i) impairment of internal-use software and other long-lived assets; (ii) gains (losses) from the sale of lines of business; and (iii) acquisition-related income and expenses.

Radian Group Inc. and Subsidiaries

Definition of Consolidated Non-GAAP Financial Measures

Exhibit F (page 2 of 2)

See Exhibit G for the reconciliation of the most comparable GAAP measures, consolidated pretax income (loss), diluted net income (loss) per share and return on equity to our non-GAAP financial measures for the consolidated company, adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity, respectively. Exhibit G also contains the reconciliation of adjusted pretax operating income (loss) to adjusted pretax operating income (loss) before allocated corporate operating expenses and adjusted gross profit for the homegenius segment.

Total adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share, adjusted net operating return on equity, homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses and homegenius adjusted gross profit should not be considered in isolation or viewed as substitutes for GAAP pretax income (loss), diluted net income (loss) per share, return on equity or net income (loss), or in the case of the homegenius non-GAAP measures, for homegenius adjusted pretax operating income (loss). Our definitions of adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share, adjusted net operating return on equity and homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses, homegenius adjusted gross profit, homegenius adjusted pretax operating margin before allocated corporate operating expenses or homegenius adjusted gross profit margin may not be comparable to similarly-named measures reported by other companies.

Radian Group Inc. and Subsidiaries Consolidated Non-GAAP Financial Measure Reconciliations Exhibit G (page 1 of 3)

Reconciliation of Consolidated Pretax Income to Adjusted Pretax Operating Income

	2022						2021
(In thousands)	Qtr 2			Qtr 1			Qtr 4			Qtr 3			Qtr 2
Consolidated pretax income	$	259,880		$	234,140		$	246,506		$	161,641		$	195,496
Less reconciling income (expense) items
Net gains (losses) on investments and other financial instruments ⁽¹⁾		(41,869	)		(29,457	)		1,516			2,098			15,661
Amortization of other acquired intangible assets		(849	)		(849	)		(863	)		(862	)		(863	)
Impairment of other long-lived assets and other non-operating items ⁽²⁾		565			(502	)		788			(244	)		(4,021	)
Total adjusted pretax operating income ⁽³⁾	$	302,033		$	264,948		$	245,065		$	160,649		$	184,719

(1)		For the fourth quarter of 2021, excludes $1.5 million in net gains on investments attributable to our homegenius segment and included in adjusted pretax operating income (loss) for that reportable segment.
(2)		The amounts for all the periods presented are included in other operating expenses on the Condensed Consolidated Statement of Operations in Exhibit A and primarily relate to impairments of other long-lived assets.
(3)		Total adjusted pretax operating income consists of adjusted pretax operating income (loss) for each reportable segment and All Other activities as follows.

	2022						2021
(In thousands)	Qtr 2			Qtr 1			Qtr 4			Qtr 3			Qtr 2
Adjusted pretax operating income (loss)
Mortgage segment	$	316,520		$	277,841		$	246,574		$	165,220		$	194,043
homegenius segment		(17,690	)		(13,506	)		(2,116	)		(5,557	)		(9,198	)
All Other activities		3,203			613			607			986			(126	)
Total adjusted pretax operating income	$	302,033		$	264,948		$	245,065		$	160,649		$	184,719

Radian Group Inc. and Subsidiaries Consolidated Non-GAAP Financial Measure Reconciliations Exhibit G (page 2 of 3)

Reconciliation of Diluted Net Income Per Share to Adjusted Diluted Net Operating Income Per Share

	2022						2021
	Qtr 2			Qtr 1			Qtr 4			Qtr 3			Qtr 2
Diluted net income per share	$	1.15		$	1.01		$	1.07		$	0.67		$	0.80
Less per-share impact of reconciling income (expense) items
Net gains (losses) on investments and other financial instruments		(0.24	)		(0.16	)		0.01			0.01			0.08
Amortization of other acquired intangible assets		—			(0.01	)		—			—			—
Impairment of other long-lived assets and other non-operating items		—			—			—			—			(0.02	)
Income tax (provision) benefit on reconciling income (expense) items⁽¹⁾		0.05			0.03			—			—			(0.01	)
Difference between statutory and effective tax rate		(0.02	)		(0.02	)		(0.01	)		(0.01	)		—
Per-share impact of reconciling income (expense) items		(0.21	)		(0.16	)		—			—			0.05
Adjusted diluted net operating income per share ⁽¹⁾	$	1.36		$	1.17		$	1.07		$	0.67		$	0.75

(1)

Calculated using the company’s federal statutory tax rate of 21%. Any permanent tax adjustments and state income taxes on these items have been deemed immaterial and are not included.

Reconciliation of Return on Equity to Adjusted Net Operating Return on Equity ⁽¹⁾

	2022				2021
	Qtr 2		Qtr 1		Qtr 4		Qtr 3		Qtr 2
Return on equity⁽¹⁾	19.9	%	17.2	%	18.2	%	11.8	%	14.5	%
Less impact of reconciling income (expense) items ⁽²⁾
Net gains (losses) on investments and other financial instruments	(4.1	)	(2.8	)	0.1		0.2		1.5
Amortization of other acquired intangible assets	(0.1	)	(0.1	)	(0.1	)	(0.1	)	(0.1	)
Impairment of other long-lived assets and other non-operating items	0.1		—		0.1		—		(0.4	)
Income tax (provision) benefit on reconciling income (expense) items⁽³⁾	0.9		0.6		—		—		(0.2	)
Difference between statutory and effective tax rate	(0.5	)	(0.4	)	(0.1	)	(0.1	)	0.1
Impact of reconciling income (expense) items	(3.7	)	(2.7	)	—		—		0.9
Adjusted net operating return on equity ⁽³⁾	23.6	%	19.9	%	18.2	%	11.8	%	13.6	%

(1)		Calculated by dividing annualized net income (loss) by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.
(2)		Annualized, as a percentage of average stockholders’ equity.
(3)		Calculated using the company’s federal statutory tax rate of 21%. Any permanent tax adjustments and state income taxes on these items have been deemed immaterial and are not included.

Radian Group Inc. and Subsidiaries Consolidated Non-GAAP Financial Measure Reconciliations Exhibit G (page 3 of 3)

Reconciliation of homegenius Adjusted Pretax Operating Income (Loss) to homegenius Adjusted Gross Profit

	2022						2021
(In thousands)	Qtr 2			Qtr 1			Qtr 4			Qtr 3			Qtr 2
homegenius adjusted pretax operating income (loss)	$	(17,690	)	$	(13,506	)	$	(2,116	)	$	(5,557	)	$	(9,198	)
Less reconciling income (expense) items
Allocation of corporate operating expenses		(5,719	)		(5,280	)		(4,847	)		(4,918	)		(4,721	)
Adjusted pretax operating income (loss) before allocated corporate operating expenses		(11,971	)		(8,226	)		2,731			(639	)		(4,477	)
Less reconciling income (expense) items
Other operating expenses before allocated corporate operating expenses		(23,205	)		(20,287	)		(16,998	)		(18,544	)		(16,160	)
homegenius adjusted gross profit	$	11,234		$	12,061		$	19,729		$	17,905		$	11,683

On a consolidated basis, “adjusted pretax operating income (loss),” “adjusted diluted net operating income (loss) per share” and “adjusted net operating return on equity” are measures not determined in accordance with GAAP. In addition, “homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses", "homegenius adjusted gross profit," “homegenius adjusted pretax operating margin before allocated corporate operating expenses” and “homegenius adjusted pretax operating margin" are also non-GAAP measures. These measures should not be considered in isolation or viewed as substitutes for GAAP pretax income (loss), diluted net income (loss) per share, return on equity or net income (loss), or in the case of the homegenius non-GAAP measures, for homegenius adjusted pretax operating income (loss).

Our definitions of adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share, adjusted net operating return on equity, homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses, homegenius adjusted gross profit, homegenius adjusted pretax operating margin before allocated corporate operating expenses or homegenius adjusted gross profit margin may not be comparable to similarly-named measures reported by other companies. See Exhibit F for additional information on our consolidated non-GAAP financial measures.

Radian Group Inc. and Subsidiaries Mortgage Supplemental Information - New Insurance Written Exhibit H

	2022						2021
($ in millions)	Qtr 2			Qtr 1			Qtr 4			Qtr 3			Qtr 2
New insurance written ("NIW")	$	18,935		$	18,655		$	23,710		$	26,558		$	21,662
Total borrower-paid NIW		99.2	%		99.2	%		99.4	%		99.2	%		99.1	%
NIW by premium type
Direct monthly and other recurring premiums		95.4	%		94.5	%		93.5	%		93.8	%		93.1	%
Borrower-paid		4.4			5.3			6.3			6.0			6.6
Lender-paid		0.2			0.2			0.2			0.2			0.3
Direct single premiums		4.6			5.5			6.5			6.2			6.9
Total NIW		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
NIW for purchases		97.1	%		91.4	%		91.1	%		89.8	%		77.1	%
NIW for refinances		2.9	%		8.6	%		8.9	%		10.2	%		22.9	%
NIW by FICO score⁽¹⁾
>=740		59.6	%		57.1	%		53.8	%		56.0	%		61.4	%
680-739		32.3			35.7			36.9			34.9			33.1
620-679		8.1			7.2			9.3			9.1			5.5
Total NIW		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
NIW by LTV
95.01% and above		17.7	%		14.6	%		16.3	%		12.1	%		10.9	%
90.01% to 95.00%		39.9			42.0			41.9			46.7			40.4
85.01% to 90.00%		26.7			29.4			28.4			26.5			27.6
85.00% and below		15.7			14.0			13.4			14.7			21.1
Total NIW		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

(1)

For loans with multiple borrowers, the percentage of NIW by FICO score represents the lowest of the borrowers’ FICO scores.

Radian Group Inc. and Subsidiaries Mortgage Supplemental Information - Primary Insurance in Force and Risk in Force Exhibit I

	June 30			March 31,				December 31,			September 30,			June 30,
($ in millions)	2022			2022				2021			2021			2021

Primary insurance in force	$	254,226		$	248,951			$	245,972		$	241,575		$	237,302

Primary risk in force ("RIF")	$	63,770		$	62,036			$	60,913		$	59,421		$	58,040
Primary RIF by premium type
Direct monthly and other recurring premiums		85.6	%		84.9	%			83.9	%		82.7	%		81.2%
Direct single premiums ⁽¹⁾		14.4	%		15.1	%			16.1	%		17.3	%		18.8%
Primary RIF by FICO score ⁽²⁾
>=740		57.2	%		56.9	%			56.9	%		57.3	%		57.5%
680-739		34.9			35.1				35.0			34.8			34.8
620-679		7.5			7.5				7.6			7.4			7.2
<=619		0.4			0.5				0.5			0.5			0.5
Total Primary		100.0	%		100.0	%			100.0	%		100.0	%		100.0%
Primary RIF by LTV
95.01% and above		16.1	%		15.5	%			15.1	%		14.6	%		14.5%
90.01% to 95.00%		48.7			48.9				48.9			48.9			48.5
85.01% to 90.00%		27.4			27.6				27.7			27.8			28.1
85.00% and below		7.8			8.0				8.3			8.7			8.9
Total		100.0	%		100.0	%			100.0	%		100.0	%		100.0%

Primary RIF by policy year
2008 and prior		4.0	%		4.3	%			4.7	%		5.2	%		5.7%
2009 - 2016		8.3			9.3				10.8			12.5			14.7
2017		3.9			4.3				4.9			5.7			6.8
2018		4.1			4.6				5.2			6.1			7.3
2019		7.7			8.6				9.7			11.4			13.6
2020		25.0			27.2				29.2			32.1			35.4
2021		32.1			34.0				35.5			27.0			16.5
2022		14.9			7.7				—			—			—
Total		100.0	%		100.0	%			100.0	%		100.0	%		100.0%

Persistency Rate (12 months ended)		71.7	%		68.0	%			64.3	%		60.8	%		57.7%⁽³⁾
Persistency Rate (quarterly, annualized) ⁽⁴⁾		79.8	%		76.9	%	⁽³⁾		71.7	%		67.5	%		66.3%

(1)		Borrower-paid Single Premium Policies were 8.1%, 8.4%, 8.5%, 8.8% and 9.2% of primary RIF for the periods indicated, respectively.
(2)		For loans with multiple borrowers, the percentage of primary RIF by FICO score represents the lowest of the borrowers’ FICO scores.
(3)		The Persistency Rate was reduced by an increase in cancellations of Single Premium Policies due to increased cancellations identified by our ongoing servicer monitoring process for Single Premium Policies.
(4)		The Persistency Rate on a quarterly, annualized basis is calculated based on loan-level detail for the quarter ending as of the date shown. It may be impacted by seasonality or other factors, including the level of refinance activity during the applicable periods and may not be indicative of full-year trends.

Radian Group Inc. and Subsidiaries Mortgage Supplemental Information - Claims and Reserves, Default Statistics Exhibit J

	2022						2021
($ in thousands)	Qtr 2			Qtr 1			Qtr 4			Qtr 3		Qtr 2
Net claims paid ⁽¹⁾
Total primary claims paid	$	3,658		$	5,153		$	4,300		$	5,330	$	4,870
Total pool and other		(396	)		(415	)		(462	)		991		(649	)
Subtotal		3,262			4,738			3,838			6,321		4,221
Impact of commutations and settlements ⁽²⁾		—			—			6,549			3,915		—
Total net claims paid	$	3,262		$	4,738		$	10,387		$	10,236	$	4,221
Total average net primary claims paid ^{(1) (3)}	$	41.6		$	41.6		$	47.8		$	42.0	$	46.8
Average direct primary claims paid ^{(3) (4)}	$	41.9		$	42.1		$	49.1		$	43.2	$	48.4

(1)		Includes the impact of reinsurance recoveries and LAE.
(2)		Includes payments to commute mortgage insurance coverage on certain performing and non-performing loans.
(3)		Calculated without giving effect to the impact of commutations and settlements.
(4)		Before reinsurance recoveries.

	June 30,		March 31,		December 31,		September 30,		June 30,
($ in thousands, except per default amounts)	2022		2022		2021		2021		2021
Reserve for losses by category ⁽¹⁾
Mortgage reserves
Primary case reserves	$	562,436	$	691,090	$	790,380	$	851,151	$	840,764
LAE		14,147		17,367		19,859		21,400		21,180
IBNR		2,424		2,539		2,886		3,788		5,464
Total primary reserves		579,007		710,996		813,125		876,339		867,408
Total pool reserves		9,756		10,330		9,826		11,413		13,085
Total 1st lien reserves		588,763		721,326		822,951		887,752		880,493
Other		184		184		185		269		270
Total Mortgage reserves		588,947		721,510		823,136		888,021		880,763
homegenius reserves		5,861		5,737		5,506		5,134		4,735
Total reserves	$	594,808	$	727,247	$	828,642	$	893,155	$	885,498
Primary reserve per primary default excluding IBNR and other	$	26,380	$	27,776	$	27,884	$	25,822	$	21,304

(1)

Includes ceded losses on reinsurance transactions, which are expected to be recovered and are included in the reinsurance recoverables reported in our condensed consolidated balance sheets.

	June 30,		March 31,		December 31,		September 30,		June 30,
	2022		2022		2021		2021		2021
Default Statistics
Primary Insurance
Number of insured loans	998,520		994,721		999,203		998,408		1,000,549
Number of loans in default	21,861		25,510		29,061		33,795		40,464
Percentage of loans in default	2.19	%	2.56	%	2.91	%	3.38	%	4.04	%

Radian Group Inc. and Subsidiaries Mortgage Supplemental Information - Reinsurance Programs Exhibit K

	2022		2021
($ in thousands)	Qtr 2	Qtr 1	Qtr 4	Qtr 3	Qtr 2
Quota Share Reinsurance (“QSR”) and Single Premium QSR Programs
Ceded premiums written⁽¹⁾	$ (21,554)	$ (22,079)	$ (7,670)	$ (1,304)	$ (7,032)
% of premiums written	(8.5) %	(8.8) %	(2.9) %	(0.5) %	(2.8) %
Ceded premiums earned	$ (7,937)	$ (3,240)	$ 3,116	$ 13,506	$ 13,491
% of premiums earned	(3.0) %	(1.2) %	1.1 %	4.8 %	4.8 %
Ceding commissions written	$ (6,584)	$ (9,153)	$ (8,232)	$ (7,861)	$ (2,362)
Ceding commissions earned ⁽²⁾	$ 3,414	$ 5,123	$ 6,288	$ 7,087	$ 7,920
Profit commission	$ 21,447	$ 22,075	$ 20,290	$ 13,630	$ 17,935
Ceded losses	$ (15,037)	$ (12,588)	$ (7,940)	$ 883	$ (1,007)
Excess-of-Loss Program
Ceded premiums written	$ 18,151	$ 16,164	$ 20,508	$ 15,434	$ 18,524
% of premiums written	7.2 %	6.4 %	7.9 %	6.1 %	7.4 %
Ceded premiums earned	$ 19,292	$ 17,588	$ 17,817	$ 16,581	$ 15,601
% of premiums earned	7.3 %	6.5 %	6.3 %	5.9 %	5.5 %
Ceded RIF ⁽³⁾
Single Premium QSR Program	$ 4,665,020	$ 4,855,228	$ 5,228,037	$ 5,439,056	$ 5,728,142
Excess-of-Loss Program	2,076,121	2,199,919	2,295,954	1,873,426	1,952,900
QSR Program	175,046	186,930	207,106	232,539	268,337
Total Ceded RIF	$ 6,916,187	$ 7,242,077	$ 7,731,097	$ 7,545,021	$ 7,949,379
PMIERs impact - reduction in Minimum Required Assets
Excess-of-Loss Program	$ 785,705	$ 881,917	$ 995,171	$ 659,151	$ 907,112
Single Premium QSR Program	268,847	286,706	314,183	328,339	355,115
QSR Program	10,226	11,214	12,541	14,116	16,545
Total PMIERs impact	$ 1,064,778	$ 1,179,837	$ 1,321,895	$ 1,001,606	$ 1,278,772

(1)		Net of profit commission.
(2)		Includes amounts reported in policy acquisition costs and other operating expenses. See Exhibit E for details.
(3)		Included in primary RIF.

FORWARD-LOOKING STATEMENTS

All statements in this press release that address events, developments or results that we expect or anticipate may occur in the future are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. In most cases, forward-looking statements may be identified by words such as “anticipate,” “may,” “will,” “could,” “should,” “would,” “expect,” “intend,” “plan,” “goal,” “contemplate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “seek,” “strategy,” “future,” “likely” or the negative or other variations on these words and other similar expressions. These statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management’s current views and assumptions with respect to future events. These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment where new risks emerge from time to time and it is not possible for us to predict all risks that may affect us. The forward-looking statements are not guarantees of future performance, and the forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. These risks and uncertainties include, without limitation:

the health of the U.S. housing market generally and changes in economic conditions that impact the size of the insurable mortgage market, the credit performance of our insured mortgage portfolio and our business prospects, including as a result of inflationary pressures from a rising interest rate environment and the potential for a recession and higher unemployment rates, as well as other macroeconomic stresses such as those that may arise from the ongoing effects of the COVID-19 pandemic and government control responses to the pandemic as well as the ongoing Russia-Ukraine conflict;
changes in the way customers, investors, ratings agencies, regulators or legislators perceive our performance, financial strength and future prospects;
Radian Guaranty Inc.’s (“Radian Guaranty”) ability to remain eligible under the Private Mortgage Insurer Eligibility Requirements (the “PMIERs”) and other applicable requirements imposed by the Federal Housing Finance Agency and by Fannie Mae and Freddie Mac (collectively, the “GSEs”) to insure loans purchased by the GSEs;
our ability to maintain an adequate level of capital in our insurance subsidiaries to satisfy existing and future regulatory requirements;
changes in the charters or business practices of, or rules or regulations imposed by or applicable to, the GSEs or loans purchased by the GSEs, which may include changes in furtherance of housing policy objectives such as the accessibility and affordability of homeownership for low-and-moderate income borrowers and underrepresented communities, or changes in the requirements for Radian Guaranty to remain an approved insurer to the GSEs such as changes in the PMIERs or the GSEs’ interpretation and application of the PMIERs;
the effects of the Enterprise Capital Framework, which establishes a new regulatory capital framework for the GSEs, and which, as finalized, increases the capital requirements for the GSEs, and among other things, could impact the GSEs' operations and pricing as well as the size of the insurable mortgage market, and which may form the basis for future changes to the PMIERs;
changes in the current housing finance system in the United States, including the roles of the Federal Housing Administration (the "FHA"), the GSEs and private mortgage insurers in this system;
our ability to successfully execute and implement our capital plans, including our risk distribution strategy through the capital markets and traditional reinsurance markets, and to maintain sufficient holding company liquidity to meet our liquidity needs;
our ability to successfully execute and implement our business plans and strategies, including plans and strategies that may require GSE and/or regulatory approvals and licenses, are subject to complex compliance requirements that we may be unable to satisfy, or may expose us to new risks including those that could impact our capital and liquidity positions;
uncertainty from the discontinuance of LIBOR and transition to one or more alternative benchmarks that could cause interest rate volatility and, among other things, impact our investment portfolio, cost of debt and cost of reinsurance through mortgage insurance-linked notes transactions;
risks related to the quality of third-party mortgage underwriting and mortgage servicing;
a decrease in the “Persistency Rates” (the percentage of insurance in force that remains in force over a period of time) of our mortgage insurance on monthly premium products;
competition in the private mortgage insurance industry generally, and more specifically: price competition in our mortgage insurance business, including the increasing prevalence of formulaic, granular risk-based pricing methodologies that are less transparent than historical rate-card-based pricing practices; and competition from the FHA and the U.S. Department of Veterans Affairs as well as from other forms of credit enhancement, such as GSE-sponsored alternatives to traditional mortgage insurance;
legislative and regulatory activity (or inactivity), including the adoption of (or failure to adopt) new laws and regulations, or changes in existing laws and regulations, or the way they are interpreted or applied;
legal and regulatory claims, assertions, actions, reviews, audits, inquiries and investigations that could result in adverse judgments, settlements, fines, injunctions, restitutions or other relief that could require significant expenditures, new or increased reserves or have other effects on our business;
the amount and timing of potential payments or adjustments associated with federal or other tax examinations;
the possibility that we may fail to estimate accurately, especially in the event of an extended economic downturn or a period of extreme market volatility and economic uncertainty, the likelihood, magnitude and timing of losses in establishing loss reserves for our mortgage insurance business or to accurately calculate and/or project our Available Assets and Minimum Required Assets under the PMIERs, which will be impacted by, among other things, the size and mix of our insurance in force, the level of defaults in our portfolio, the reported status of defaults in our portfolio, including whether they are subject to mortgage forbearance, a repayment plan or a loan modification trial period granted in response to a financial hardship related to COVID-19, the level of cash flow generated by our insurance operations and our risk distribution strategies;
volatility in our financial results caused by changes in the fair value of our assets and liabilities, including with respect to our use of derivatives and within our investment portfolio;
changes in “GAAP” (accounting principles generally accepted in the U.S.) or “SAPP” (statutory accounting principles and practices including those required or permitted, if applicable, by the insurance departments of the respective states of domicile of our insurance subsidiaries) rules and guidance, or their interpretation;
risks associated with investments to grow our existing businesses, or to pursue new lines of business or new products and services, including our ability and related costs to develop, launch and implement new and innovative technologies and digital products and services, whether these products and services will receive broad customer acceptance or will disrupt existing customer relations, and additional financial risks related to these investments, including required changes in our investment, financing and hedging strategies, and risks associated with our increased use of financial leverage, which could expose us to liquidity risks resulting from changes in the fair values of assets;
the effectiveness and security of our information technology systems and digital products and services, including the risk that these systems, products or services fail to operate as expected or planned or expose us to cybersecurity or third party risks, including due to malware, unauthorized access, cyber-attack, natural disasters or other similar events;
our ability to attract and retain key employees; and
legal and other limitations on amounts we may receive from our subsidiaries, including dividends or ordinary course distributions under our internal tax- and expense-sharing arrangements.

For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, and to subsequent reports and registration statements filed from time to time with the U.S. Securities and Exchange Commission. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which we issued this press release. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements to reflect new information or future events or for any other reason.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220727005926/en/

Contacts

For Investors

John Damian - Phone: 215.231.1383

email: john.damian@radian.com

For Media

Rashi Iyer - Phone 215.231.1167

email: rashi.iyer@radian.com

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Radian Announces Second Quarter 2022 Financial Results

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